October 17, 2017 l Boston. The 2017 Best Practices exclusive workshop and awards program for the industry’s truly elite firms will highlight content from the 2017 Adviser Technology Study as well as the 2017 Compensation and Staffing Study”

House panel denies SEC additional funding for RIA exams

As in the past, budget is short of what agency says it needs to increase oversight of advisers

A House panel on Wednesday denied the Securities and Exchange Commission the funding it says it needs to hire additional investment-adviser examiners.

In a voice vote, the House Appropriations Subcommittee on Financial Services and General Government approved a measure that sets the SEC budget at $1.4 billion for fiscal 2015, a $50 million increase to its current budget but $300 million less than the Obama administration requested.

The SEC funding was part of an overall bill that totaled $21.3 billion and covered several agencies, including the IRS and Consumer Financial Protection Bureau.

The full appropriations committee is likely to act on the bill soon. Chairman Harold Rogers, R-Ky., said that his goal is to complete all appropriations legislation by July 4.

In congressional appearances earlier this year, SEC Chairman Mary Jo White argued for the SEC's full $1.7 billion request, saying it needed the funding in part to hire an additional 316 examiners for the Office of Compliance Inspections and Examinations. About 240 of the new hires would be investment-adviser examiners, according to the agency.

The SEC needs the additional staff power in order to increase coverage of the approximately 11,000 registered investment advisers, according to Ms. White. The agency examines annually about 9% of RIAs.

The fiscal 2015 financial services appropriations bill follows the pattern of recent SEC-funding legislation. House Republicans are again demonstrating that they have concerns about the SEC's performance and are not inclined to give the agency a big funding boost. Democrats criticized the party's stance.

Rep. Nita Lowey, D-N.Y. and ranking member of the full Appropriations Committee, said that the number of investment advisers under SEC regulation has increased by 40% over the last decade and their assets under management have more than doubled — to about $55 trillion. She asserted that SEC funding has not kept up with its oversight needs.

“Harming the ability of the SEC to succeed could put mom-and-pop investors at risk,” Ms. Lowey said.

Investment-adviser advocates were anticipating the subcommittee's decision on SEC funding.

“It's disappointing but consistent with congressional action on past administration requests,” said Neil Simon, vice president for government relations at the Investment Adviser Association.

Increasing the SEC's funding would have no effect on the federal budget because the agency funds itself through fees it charges to registered financial companies. But Congress sets the level of money that the agency can spend.

“Adequate funding authority would not take a dime out of U.S. taxpayer dollars nor would it impact the deficit or the debt,” Ms. Lowey said.

Republicans maintain that keeping SEC funding under the purview of Congress strengthens oversight of the agency.

The Democratic-controlled Senate is typically more generous to the SEC than the Republican-majority House. The Senate has not yet acted on the SEC budget. But over the last few years, the House funding level has been more influential in the final appropriation.

“At the end of the day, it seems that the numbers the SEC has seen are what's been approved by the House,” Mr. Simon said.